Volvo revises its electric car plans

© Volvo

Volvo, the flagship of the Swedish automobile industry now owned by the Chinese giant Geely, has just created a surprise. The manufacturer, until now spearheading the transition to electric, announced revising its ambitions downwards. Gone is the goal of 100% electric vehicle sales by 2030. The brand is now aiming for between 90% and 100% electrified vehicles, including plug-in hybrids.

A market in full transformation

This strategic turnaround by Volvo is not insignificant. It reflects the turbulence currently affecting the electric car market. After years of euphoria and exponential growth, the sector is showing signs of running out of steam. The end of generous purchase subsidies in some countries, notably Germany, has dampened consumer enthusiasm.

Jim Rowan, CEO of Volvo, sums up the situation: “We firmly believe that our future will be electric. However, it is clear that electrification will not be linear, and that customers and markets will convert to it at different speeds.”

This strategic decision allows Volvo to adapt to a more volatile market than expected. By keeping a share of hybrid engines in its range, the manufacturer gives itself room to maneuver to meet the diverse expectations of its international clientele.

Volvo, always at the forefront of electrification

© Volvo

Despite this slight decline, Volvo remains an undisputed leader in electrification in Europe. A quarter of its sales are 100& nbsp;% electric, to which are added a third of plug-in hybrids. Its EX30 compact SUV rose to third place among the best-selling electric cars in Europe in the first half of 2024, behind the Tesla Model X and Model 3.

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Unlike many of its competitors, Volvo has managed the feat of making its electric models almost as profitable as their thermal counterparts. With a gross margin of 20% on its battery-powered vehicles, compared to 23% for gasoline, the Swedish manufacturer proves that the energy transition can rhyme with profitability.

This technological and economic advance could prove particularly valuable in the months to come. The European CAFE regulation, which aims to reduce CO2 emissions from new vehicles, will be tightened in 2025. Volvo, having already exceeded its targets by 50%, could then monetize its CO2 credits with less advanced manufacturers, potentially generating ” several hundred million euros “ according to UBS analysts.

Geopolitical challenges to overcome

However, the picture is not all rosy for Volvo. Its heavy dependence on China, where the group produces some of its vehicles, is becoming a handicap in a context of growing trade tensions. The increase in European customs duties on vehicles imported from China is penalizing the manufacturer. In the United States, the situation is even more critical: Volvo had to suspend deliveries of its EX30 SUV made in China in June following the introduction of a 100% import surcharge.

These geopolitical obstacles have forced Volvo to revise downwards its sales forecasts for the current year. The manufacturer must now juggle its electrification ambitions, its profitability imperatives and the vagaries of an increasingly fragmented global market.

• Volvo abandons its goal of 100% electric sales by 2030, now aiming for 90-100% electrified vehicles (including plug-in hybrids)
• The manufacturer remains the leader in electrification in Europe, with electric models almost as profitable as thermal ones
• Volvo faces geopolitical challenges, including trade tensions with China, which impact its sales and its global strategy

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